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A Contractor's Take on Home Warranties

By: House Method

Our team has spent hours researching home warranties to decide if they’re worth it. To broaden our understanding, we talked to Michael Stimpson, Owner and Manager of Snowflake Air. Stimpson shared his perspective on working with home warranty companies as a businessman and home repair professional. Affiliate disclosure.

One of the biggest surprises when starting Snowflake Air was the tremendous marketing effort and expense. An HVAC company spends a significant amount of money on every new customer it receives. Some estimate that cost to be anywhere between $200 and $300 per new customer. When these costs can be reduced it allows the company to reduce prices for their home services and still make a profit. This may be a strange way to introduce the topic of working with home warranty companies but is a very important concept to understand how they work.

The home warranty customer expects to pay less for the plan than they would spend on repairing or replacing the covered items. For those customers who do end up needing home repair services, the home warranty often does save them money. The costs they would pay directly to an HVAC company without a warranty would be significantly higher than what they will pay for their home warranty, depending on the type of repair required. This is because the home warranty company pays its contractors much less than what the contractor would normally charge a customer.

In the end, this is a win-win-win situation when everything goes well. The customer gets a good deal on repair services, the contractor gets work without having to pay for marketing, and the home warranty company is able to provide an affordable product.

The pros

Snowflake Air has worked with several home warranty companies, including Choice Home Warranty, Select Home Warranty, and Landmark Home Warranty, which is under the same parent company as American Home Shield. The basic concept for all of these is the same, but the way they work with their contractors varies. There are two important benefits to working with these home warranty companies. First, as mentioned above, is that the warranty company brings the work to the contractor. Second, there’s work during the slow times, which helps fill gaps in our schedule.

The cons

There are also some drawbacks to working with home warranty companies. The first, and easiest to quantify, is the lower profit being made. Although the reduced marketing costs help make up for the lower prices, there is still a gap between profits from normal customers and home warranty customers. Working with a home warranty company is a great way to acquire new customers for contractors who don’t have a robust marketing strategy or for contractors just getting started. For Snowflake Air, it’s a great way to supplement our schedule during slower times. During busier times, we may reject home warranty work in favor of direct customers.

Customer satisfaction

Another drawback, which is more difficult to quantify, is the difficulty in satisfying the customer. Some aspects of the work are out of our control and can be upsetting to the customer. The chief of these is slow approval or, worse, a denied claim. When this happens we do our best to stay out of the middle and let the home warranty company handle the situation, but inevitably, we get involved. In many cases, it works out fine and we end up doing the work directly for the customer. In other cases, the customer gets upset with us as they believe we somehow caused the negative outcome.

Our job is simply to diagnose the problem and inform the home warranty company.

The home warranty company then determines if the problem is covered and how much it’ll pay for the repair. Some repairs aren’t covered, and each home warranty company has its own restrictions.

One of the most common complaints we hear from homeowners is that the warranty company sometimes requires proof of maintenance on the system before approving repairs. This is a major problem for homeowners who just purchased the house because it’s rare that the previous owner would have passed any documentation onto them. In fact, we find that a large percentage of systems aren’t properly maintained, so very few customers have any proof of maintenance.

Most often it’s expensive repairs that prompt the warranty company to require proof of maintenance. It can be most upsetting to the customer when they think they’re getting a new air conditioner only to find out that their claim was denied. If the customer believes we’re somehow part of the reason for that denied claim, they may give us a bad review, which can negatively impact our company. Our online reputation is very important and we make a great effort to protect it by providing excellent customer service at every job.

Common claims

One of the most common problems we find that a homeowner can fix themselves is a dirty air filter. A dirty air filter will cause low air flow, which overheats the system and stops the system from running properly. An $8 filter ends up costing the homeowner $60 to have an HVAC technician come swap it out for them.

We routinely find other maintenance type issues as well, such as a dirty flame sensor or coil. Since these are maintenance issues, they usually aren’t covered by the home warranty, so the homeowner ends up paying their copay only to find out they need a tune-up service.

Other common repairs we do that are covered include replacing igniters, control boards, inducer motors, and blower motors. These repairs cost $350$700, so having a home warranty can save big bucks as long as the consumer is educated and has proper expectations.

Michael's main takeaways

  • Read the fine print in your home warranty contract to find out what is and is not covered.
  • Conduct regular maintenance on your equipment and keep your receipts. If you’ve just moved into a home and the seller didn't pass on maintenance records, discuss this with the home warranty company.
  • Don’t blame the contractor for a denied claim. They’re just following the instructions of the home warranty company.
  • Replace your air filters regularly. This can save you your copay amount.
  • Read reviews on the home warranty company you’re considering. Reviews are a good source for knowing the good, the bad and ugly so you know what you’re getting into.
  • Home warranties can be a good investment, especially if you have older systems and appliances.

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